Adapted from a press release:
J.M. Smucker plans to sell several pet food brands to Post Holdings, a consumer-packaged goods holding company headquartered in St. Louis, Missouri, USA. The transaction includes the Rachael Ray Nutrish, 9Lives, Kibbles 'n Bits, Nature's Recipe, and Gravy Train brands as well as the Smucker’s private label pet food business.
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Smucker's sale of these brands is valued at approximately US$1.2 billion, consisting of US$700 million in cash and approximately 5.39 million shares of common stock of Post Holdings, Inc.
The deal includes relevant trademarks and licenses, and manufacturing and distribution facilities in Bloomsburg, Pennsylvania, USA as well as its manufacturing facilities in Meadville, Pennsylvania and Lawrence, Kansas, USA. In addition, a group of employees will transition to Post Holdings, Inc. to support the business. Smucker expects these brands to generate net sales of approximately US$1.5 billion for the fiscal year ended April 30, 2023.
"This divestiture supports our strategy to prioritize investments and resources in the areas of our business that offer the strongest growth and profit potential. In our pet business this is reflected in our focus on dog snacks and cat food, anchored by our Milk-Bone and Meow Mix brands, respectively," Mark Smucker, president and CEO of J.M. Smucker, said in a press release.
Smucker expects the divestiture to be dilutive to its adjusted earnings per share by approximately US$0.45 on a full-year basis, reflecting the foregone profit related to the divested brands and before factoring in any benefits from the use of transaction proceeds and the impact of stranded overhead costs. Smucker anticipates replacing the divested earnings through the deployment of transaction proceeds and mitigating the impact of stranded overhead costs through initiatives within its Transformation Office over time.
The transaction is anticipated to close in the fourth quarter of Smucker's current fiscal year ending April 30, 2023, subject to closing conditions including the receipt of required regulatory approvals. Goldman Sachs & Co., LLC is serving as Smucker's financial advisor and Wachtell, Lipton, Rosen and Katz is serving as Smucker's legal advisor in connection with the transaction.
Smucker will discuss the transaction further during its prepared remarks at the Consumer Analyst Group of New York conference on Feb. 22, 2023 at 1:00 p.m. EST and when it releases its third quarter fiscal 2023 financial results on Feb. 28, 2023.
Smucker pet food, treat sales up 14% in Q2 FY23
In November 2022, Smucker reported its financial results for the second quarter of fiscal year 2023. Net sales for J.M. Smucker’s pet food segment increased by 14% in the second quarter of fiscal year 2023 compared to the same quarter last year.
“In cat food, net sales increased 19% led by the Meow Mix brand, which grew 22% and benefited from higher pricing and increased volume/mix,” Mark Smucker, president and chief executive officer of J.M. Smucker, said in prepared remarks. “This reflects another strong quarter for the brand, with year-over-year net sales growth in 19 of the last 20 quarters.”
Dog snack net sales increased 15%, he said. Milk-Bone was Smucker’s top dog treat brand with sales up 20%.
“The Milk-Bone brand continues to drive growth through core offerings and premium positioned innovation for our market-leading dog snacks business and the segment overall,” Smucker said.
Milk-Bone grew at twice the pet treat category rate, he said.
Kibbles ‘N Bits and Nutrish brands led dog food net sales, which increased 10% overall.
“Consumer take away was even stronger, up 18%, demonstrating progress on our efforts to stabilize our dog food portfolio,” Smucker said.
“We are well positioned to continue benefiting from some shifts within the category, as our portfolio provides offerings across the price spectrum including premium, mainstream, and value products,” he said.
Internationally, net sales for Smucker’s pet food and snacks experienced double-digit sales and volume growth in the quarter led by the Meow Mix brand.
Smucker pet food net sales in the United States
Considering just the United States, retail pet foods net sales increased 9% in the second quarter of this fiscal year compared to the same period last year.
Net sales increased US$63.6 million. Excluding US$27.8 million of noncomparable net sales in the prior year related to the divested private label dry pet food business, net sales increased $91.4 million, or 14%. Higher net price realization increased net sales by 16 percentage points, primarily reflecting list price increases across the portfolio.
Segment profit increased $20.5 million, primarily reflecting a favorable net impact of higher net price realization and increased commodity and ingredient, transportation, and packaging costs.
“Higher net pricing actions across the portfolio contributed a 16 percentage point increase to net sales, partially offset by a decreased contribution from volume/mix of 3 percentage points, primarily driven by decreases for dog food,” Tucker Marshall, chief financial officer said in a prepared statement.
U.S. net sales growth of cat food and treats and dog food and treats all had double-digit percentage increases. Segment profit increased 21%, primarily reflecting a favorable net impact of higher net price realization and increased commodity and ingredient, transportation, and packaging costs.
“Our strategic growth brands, Meow Mix and Milk-Bone, experienced both sales and volume growth in the quarter, with net sales increases of 22% and 20%, respectively,” he said.
